Capital requirements for business risk
Article 6
1. The capital requirements of a CSD for business risk shall be whichever of the following is higher: (a) the estimate resulting from the application of paragraph 2, minus whichever of the following is the lowest: (i) the net income after tax of the last audited financial year; (ii) the expected net income after tax for the current financial year; (iii) the expected net income after tax for the most past financial year where audited results are not yet available; (b) 25 % of the CSD's annual gross operational expenses referred to in paragraph 3. 2. For the purposes of point (a) of paragraph 1, a CSD shall apply all of the following: (a) estimate the capital necessary to cover losses resulting from business risk on reasonably foreseeable adverse scenarios relevant to its business model; (b) document the assumptions and the methodologies used to estimate the expected losses referred to in point (a); (c) review and update the scenarios referred to in point (a) at least annually. 3. For the calculation of a CSD's annual gross operational expenses, the following shall apply: (a) the CSD's annual gross operational expenses shall consist of at least the following: (i) total personnel expenses including wages, salaries, bonuses and social costs; (ii) total general administrative expenses, and, in particular, marketing and representation expenses; (iii) insurance expenses; (iv) other employees' expenses and travelling; (v) real estate expenses; (vi) IT support expenses; (vii) telecommunications expenses; (viii) postage and data transfer expenses; (ix) external consultancy expenses; (x) tangible and intangible assets' depreciation and amortisation; (xi) impairment and disposal of fixed assets; (b) the CSD's annual gross operational expenses shall be determined in accordance with one of the following: (i) International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 of the European Parliament and of the Council ( 11 ) ; (ii) Council Directives 78/660/EEC ( 12 ) , 83/349/EEC ( 13 ) and 86/635/EEC; (iii) generally accepted accounting principles of a third country determined to be equivalent to IFRS in accordance with Commission Regulation (EC) No 1569/2007 ( 14 ) or accounting standards of a third country the use of which is permitted in accordance with Article 4 of that Regulation; (c) the CSD may deduct tangible and intangible assets' depreciation and amortisation from annual gross operational expenses; (d) the CSD shall use the most recent audited information from their annual financial statement; (e) where the CSD has not completed business for one year from the date it starts its operations, it shall apply the gross operational expenses projected in its business plan.